Rupee halts 5-day gain

MARKET ROUND-UP

The rupee halted its five-day gain on speculation of oil refiners stepping up demand for the dollar to pay for crude.

The currency retreated from the strongest level in two months as oil prices in New York declined for a second day. India imports almost 75 per cent of the commodity to meet local consumption. The trend is still for the rupee to appreciate on capital inflows, said Vikas Babu at Andhra Bank.

“We are seeing oil importers purchasing dollars,” said Babu, a Mumbai-based foreign-exchange trader at Andhra Bank. He predicted the rupee would climb to 44.20 by the end of this week.

The currency was little changed at 44.4370 per dollar at close in Mumbai, according to data compiled by Bloomberg. It touched 44.335 yesterday, the strongest level since May 3. Crude fell 0.8 per cent to $95.67 a barrel on Tuesday in New York, following a 0.5 percent drop on July 1. US markets were closed yesterday for the Independence Day holiday.

Overseas investors bought $1.4 billion more Indian stocks than they sold last week, according to exchange data.

Offshore forwards indicate the rupee will trade at 44.93 to the dollar in three months, compared with expectations of 44.90 yesterday.

BONDS GAIN
Government bond prices firmed up on fresh buying support from banks and companies.

Abhishek Goenka, chief executive, India Forex, said, “We have seen around $2-billion inflow in the equity markets in the last eight trading sessions, resulting into recent smart appreciation of the rupee”.

The 7.80 per cent government security maturing in 2021 hardened to Rs 96.41 from Rs 96.31 yesterday, while its yield moved down to 8.34 per cent from 8.36 per cent. The 8.08 per cent government security maturing in 2022 shot up to Rs 97.46 from Rs 97.30, while its yield eased to 8.44 per cent from 8.46 per cent. The 8.13 per cent government security maturing in 2022 rose to Rs 97.74 from Rs 97.56, while its yield declined to 8.44 per cent from 8.47 per cent.

The 8.26 per cent government security maturing in 2027 and the 7.59 per cent government security maturing in 2016 were also quoted higher at Rs 96.82 and Rs 97.02, respectively.

The Reserve Bank of India, under the Liquidity Adjustment Facility, purchased securities worth Rs 14,750 crore from 14 bids at one-day repo auction at a fixed rate of 7.50 per cent.

CALL RATE FIRMS UP
The call rate improved at the overnight call money market on Tuesday due to sustained demand from borrowing banks. The overnight call money rate finished higher at 7.50 per cent from yesterday’s closing of 7.25. It moved in a range of 7.60 per cent and 7.40 per cent.